BY MTHANDAZO NYONI
A highly technical, scientific and competitive agricultural environment is causing an increased number of farmers across the world to become more aware of the need to protect their businesses against risk.
This is especially true in the livestock sector where farmers can suffer great losses because of severe weather, fires or diseases.
In Zimbabwe, farmers are particularly affected by droughts which are becoming more frequent and more severe due to climate change.
Severe droughts have had devastating effects on farmers, wiping out most of their livestock and leading to distress sales, which can leave farmers without a source of food or income, pushing them to extreme poverty and vulnerability.
For instance, Matabeleland South province last year alone lost more than 25 000 cattle due to drought, while 6 220 deaths were recorded in Matabeleland North, according to official figures.
To buffer local livestock farmers from these risks, an index-based livestock insurance programme (IBLI), which protects livestock farmers in drought-prone arid and semi-arid lands from climate-related losses, can be considered in Zimbabwe.
The programme, which began in Kenya in 2010 as a pilot project, has been extended into Ethiopia, and is under consideration in several other east African countries.
- Chamisa under fire over US$120K donation
- Mavhunga puts DeMbare into Chibuku quarterfinals
- Pension funds bet on Cabora Bassa oilfields
- Councils defy govt fire tender directive
Keep Reading
Unlike traditional insurance programmes which pay out on the loss of the animal, IBLI is tied to climatic conditions such as the amount of rainfall and distribution of pasture availability over a season.
By tying the pay-outs to objective criteria, the program, according to the International Livestock Research Institute (ILRI), avoids the moral hazards of traditional insurance programmes while giving farmers the resources to help their animals survive periods of sustained crises.
For the Kenya Livestock Insurance Programme (KLIP) scheme, the level of available vegetation for forage during the rainy season is assessed using satellite data; when the level falls below a certain point, farmers receive a pay-out to buy food, water or veterinary services to keep livestock alive.
According to economists, insurance paid out only when an animal actually dies would not have created this incentive.
Economists also point out that some insurers tend to have more appetite for index-based insurance or weather-index insurance that is triggered by a catastrophe which would inevitably leave farmers with losses.
Pay-outs under such catastrophe schemes could help prevent farmers with both crops and livestock from having to sell animals if a disaster strikes, they opine.
Agricultural economist Reneth Mano described the use of weather-index livestock insurance to enable farmers to insure against drought as a positive move provided the insurance premiums make business sense to the farmers.
“Now for the insurance premiums to make business sense for farmers of cattle, the total number of cattle that should be under the weather-index insurance scheme cannot be just five in Insiza or two in Binga, but they have to at least reach a certain threshold, 10 000 or 20 000 cattle in a particular community,” he said.
“I think it’s a viable and feasible option but it requires the organisation of farmers into commercially-viable clusters or community of cattle producers who can then approach a weather-index insurance provider . . . I know for sure that in Kenya it has been a bit popular and there is no reason why it won’t be popular here in Zimbabwe.”
Mano added: “So it’s good to plan ahead and have a community approach.”
Farmers acknowledged the need to have livestock insurance cover, but they are reluctant to embrace it due to fear of being duped.
“Insuring your livestock is ideal, but we had issues with some insurance companies who robbed some of our farmers. They come and take money from farmers and literally disappear with no trace,” Livestock Farmers’ Union chairperson Sifiso Sibanda, said.
“As such, we have no trust in those bogus insurers and we will not work with them. However, as a union we are considering self-insurance in the long run,” he said.
According to the Insurance and Pensions Commission (Ipec), there are high levels of insurance fraud in Zimbabwe, whereby it is estimated that probably between 25% and 30% of claims that are paid by the insurance sector are fraudulent claims.
Mano, however, said self-insurance was expensive for farmers.
“So when a drought happens, the farmers either have to sell some of their cattle in order to save the other cattle. In other words, they are self-insuring against drought. It’s a very expensive way to manage drought by self-insurance because you might run out of funds or be forced to sell productive animals in order to save the other productive animals,” he said.
Farmers said there was a need for insurance companies to educate them about the dangers of not insuring and benefits of insuring their animals.
“We need to be educated on these matters. We also need something which is affordable and tailor-made,” a communal farmer, Dingani Ndlovu said.
Matabeleland South livestock specialist Hatitye Muchemwa encouraged farmers to consider insuring their livestock against drought risks.
“However, the challenge is that we have had no reputable livestock insurers. The insurance firms should offer the livestock farmers tailor-made insurance solutions and keep up with new trends in agricultural insurance,” he said.
Matabeleland North provincial veterinary officer Polex Moyo said insurance companies that came previously failed because they were loss-based insurance.
Traditional loss-based insurance, according to the World Bank, relies on the principle of indemnity, where actual losses are measured in the field either after a specific event.
This type of insurance is not viable especially for communal farmers because of the high cost of verifying losses.
Zimbabwe’s insurance sector lacks robust operational information technology systems, says Sibongile Siwela, Ipec Insurance director.
Insurance Council of Zimbabwe marketing & PR manager Ringisai Batiya said the uptake of livestock insurance was notable among commercial cattle ranchers.
She said most communal and subsistence farmers do not have insurance and continue to “rely on traditional methods of risk management and recovery in the event of a loss.
“Livestock, just like any other classes of agriculture insurance, continue to have an extremely low uptake. The farmers significantly rely on traditional methods of risk management.
“Limited disposable income within the rural community coupled with thin profit margins from farming activities are a restrictive factor. Lack of knowledge and awareness on insurance benefits is another factor particularly where financial resources are available,” Batiya said.
Ipec spokesperson Lloyd Gumbo said they were implementing various awareness initiatives to sensitise the public about the importance of insuring their assets.
“Livestock farmers are also encouraged to insure their livestock so that they can quickly recover in the event that their livestock die,” he said.
For any livestock insurance programme to work, economists opine that public and private sector support is essential.
There is also a need for the government to subsidise agricultural insurance to reduce over time.
For example, the Kenyan government initially subsidised 100% of pastoralists’ premiums under KLIP, covering each household for five calves. In 2018, voluntary top-ups were introduced under which households can opt to pay premiums to cover an additional five animals.
Official figures show that Zimbabwe has a national cattle herd of 5,7 million down from nearly six million cattle in 1996 due to droughts which have killed thousands of cattle especially in the southern region.
The national herd is again at risk this year, with water bodies in Matabeleland South, Matabeleland North, Midlands, Masvingo and Manicaland drying up while pastures are fast depleting.
These provinces account for 80% of the national beef cattle herd, according to the Department of Veterinary Services August report.
A new report prepared by Mano reveals that about 1.8 million cattle in Zimbabwe’s smallholder communal and A1 farming areas with an estimated market value of US$942 million are at risk of being wiped out by drought-induced starvation this year.
Livestock and livestock products contribute significantly to the economy of Zimbabwe, with cattle accounting for 35-38% of the gross domestic product contributed by the agricultural sector, according to the Food and Agriculture Organisation.
It is estimated that up to 60% of rural households own cattle while 70-90% own goats.
Livestock also acts as strategic household investment; hence, should be protected.
Besides insuring their animals, Moyo urged farmers to come together and contribute for borehole drillings in their communities to address water challenges. He said farmers should prepare for the first two weeks of the rainy season, a very critical stage, by buying molasses and hay, among others, to feed their livestock.
